OPEC members are considering deeper production cuts, or extending their existing deal, in response to a slump in prices caused by the outbreak of coronavirus in China, according to a source in the group, S&P Global said in a report.
“The next two weeks are very critical for not only the oil market but the global economy,” the OPEC source said Monday, speaking on condition of anonymity.
“There is right now discussion among the ministers of OPEC+ of watching the market closely and preparing to do anything if there is a need for it.” S&P Global said the remarks followed a statement on Monday from Saudi Arabia’s oil minister, Prince Abdulaziz bin Salman, aimed at calming the market after crude dropped below $59/b amid fears of a wider economic impact of the virus, which has killed at least 80 people in China and shut down the country.
At the time the report was published, Brent was trading 2.8% lower at $58.99/b at 1340 GMT.
The kingdom has “the capability and flexibility needed to respond to any developments, by taking the necessary actions to support oil market stability, if the situation so requires,” Prince Abdulaziz said in a statement carried by the Saudi Press Agency.
According to Prince Abdulaziz, the kingdom “is closely monitoring the developments in the global oil market resulting from the gloomy expectations about the impact of the coronavirus outbreak on the Chinese and the global economy and oil market fundamentals.”
He added that the impact on global markets, including oil and other commodities, is driven by “psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand.”
China — the world’s second-largest economy — imported an average 10.16 million b/d of crude in 2019, according to official data. Chinese authorities have continued to lock down cities to contain the virus, which has spread and reached countries including the US and Canada.
The OPEC-led alliance of oil producers, dubbed OPEC+, is in the midst of trimming 1.7 million b/d of oil from the market through to the end of March to help soak up excess supply. Saudi Arabia will keep its crude production at 9.744 million b/d in January and February, in line with its promise to produce 400,000 b/d below its official OPEC+ quota during the first quarter, the minister said earlier this month.
Source: S&P Global
